A high value mix

FOLLOWING first heavy mineral concentrate production at Keysbrook, MZI Resources is ramping up with the aim of becoming the world’s largest primary producer of leucoxene.

WA has a long history of mineral sands mining and processing, providing MZI and the Keysbrook project with experienced employees and established community and regulatory operating models.

Smooth construction and commissioning assisted production to begin three weeks ahead of schedule in October 2015, with first concentrate from the nearby Picton mineral separation plant – owned by Doral Mineral Sands – achieved in early November.

MZI is targeting full capacity of 95,000 tonnes per annum of leucoxene and zircon by the end of the calendar year, to coincide with its first sales.

Keysbrook

MZI spent more than 10 years exploring and developing the 1406 hectare Keysbrook deposit 70km from Perth; managing director Trevor Matthews said the successful project was the result of hard work and commitment.

“We are a classic case of an overnight success that was actually many years in the making,” he said.

“Keysbrook represents the culmination of 15 years of hard work by a range of people who have helped drive the project forward and overcome many challenges to get Keysbrook to where it is today.”

These challenges included securing regulatory approvals and landowner access agreements, proving up the resource and metallurgy, securing customer off-takes, raising the necessary finance in very difficult market conditions, and turning an empty paddock into a fully-fledged mine in less than a year.

The first heavy mineral concentrate being produced from the wet concentrator plant at Keysbrook. All images: MZI Resources.

Mr Matthews said the achievement was an “incredible feat” that spoke volumes for the dedication and commitment of those involved in the project.

“We are very proud of completing construction and commencing production both early and within budget,” he said.

“Commencing work at a time during a downswing in the mining and construction cycle was a significant benefit in terms of labour and equipment availability, more competitive cost inputs, and contractors looking for work.

“And of course the achievements underline what a robust project Keysbrook is from an operational and financial perspective.”

In late October 2015 MZI undertook a $45 million placement and share purchase plan which garnered a “strong response” in support of the long-term viability of Keysbrook.

“We were seeking to raise more than our entire market capitalisation in a very difficult equity market,” Mr Matthews said.

“That we have been successful in doing so (subject to receipt of final shareholder approvals) speaks volumes for the strong fundamentals of the Keysbrook project, and the importance of having strong and supportive foundation shareholders.

“We believe that while equity markets for resources stocks are still difficult, the market is also starting to recognise Keysbrook’s unique place as an emerging high margin producer of premium mineral sands products.

“Once the final tranche of the placement has been completed, and we have successfully completed ramp-up to full capacity, we are very confident that the company’s value will be better reflected in the market.”

Products

Unlike many titanium and zircon operations in the southwest of WA, Keysbrook has leucoxene as its major constituent.
Leucoxene is used to produce titanium pigment for paint and plastics and well as titanium metal and flux for welding electrodes, and zircon is primarily used for ceramic and porcelain products.

MZI’s September quarterly report highlighted a soft mineral sands market, however stated that “growing sentiment” in the market indicated that the mineral sands cycle was “near the bottom as capacity closures start[ed] to affect supply and inventory”.

The first load of heavy mineral concentrate being fed into the Picton mineral separation plant.

This bodes well for the 2016 painting season, according to Mr Matthews.

“Because of leucoxene’s ‘everyday’ uses, global demand and pricing is very much reflective of global GDP growth,” he said.

“Even though the short term outlook for the broader mineral sands market remains subdued, virtually all observers anticipate moderate improvement in prices and demand over the medium to longer term, as global GDP picks up and the current overhang of certain types of mineral sands products is absorbed.”

MZI was “in quite a unique position” due to its comparatively low operating costs and high value product mix.

“Unlike other producers, we do not have to produce large volumes of low value ilmenite in order to produce the titanium and zircon rich products which generate the bulk of the value at most mineral sands mines,” Mr Matthews said.

At subdued prices MZI expected to generate earnings before interest, taxes, and amortisation (EBITDA) of around 50 per cent, which would put the company among the top tier of producers.

Keysbrook produced three products at varying grades and tonnages, ranging from 28,700tpa to 37,200tpa at grades of more than 70 per cent titanium oxide and 50 per cent zircon.

Heavy mineral concentrate is transported about 130km south for processing under a strategic alliance with Doral through its Picton mineral separation plant, which reduced MZI’s total capital costs.

Leucoxene would be shipped through Bunbury via a port access agreement with the Bunbury Port Authority to customers in China through several off-take agreements with Chemors (formerly DuPont) and Tricoastal.

The agreements secured more than 85 per cent of Keysbrook’s planned initial production.

Keysbrook was licensed to produce for at least six and a half years and MZI was planning to seek further approvals to extend operations to more than eight years.

Exploration

Keysbrook’s resources were boosted in August 2015 with the completion of a resource and reconnaissance drilling program to firm up grades for the first year of mining.

The program increased the Keysbrook deposit’s resources by 11.4 million tonnes of contained heavy minerals (HM) to 90.3mt of HM and identified a new deposit to the west of Keysbrook called Yangedi.

Combined with existing resources at the Railway deposit, the result brought total resources for the Keysbrook project area to 155mt of HM – a 68 per cent increase.

The deposit was in a different geological setting than the Keysbrook deposit and contained a mineral assemblage aligned to Keysbrook’s 70 per cent leucoxene product at lower grades; however, the location relative to the wet concentrator plant meant it was highly prospective as a future production source either together with, or following the completion of, mining at the Keysbrook deposit.

“Importantly, the mineralisation remains open in most directions,” Mr Matthews said.

“So we think there is still a lot more potential to grow what is already a huge resource base even further.”

The new discoveries gave MZI “greater flexibility” to optimise the mine plan according to conditions and gave the company a base to expand production in the future.

Based on upgraded resources, the potential project life for Keysbrook was more than 30 years at scheduled production rates.

Footprint

Mr Matthews said mineral sands mining left a “minimal footprint, unlike other forms of mining such as gold or iron ore”.

Under the existing rehabilitation plan, the process of clearing, mining and rehabilitating would occur progressively.
Rehabilitated native vegetation would be protected by fences from stock and would take several years to establish.

No chemicals were used in the mining and wet concentration process apart from non-toxic flocculants to remove clay from the water, allowing the water to be recycled on site.

“We consider it very much a ‘green’ project with a light environmental footprint,” Mr Matthews said.

The first load of ore being dumped into the mine feed unit.

“We will fully rehabilitate mined areas to near the original state within two years and will also be restoring substantial areas of historically degraded bushland to health; we recycle 88 per cent of the water we use; we only mine to an average depth of 2.2m; there is no mine waste, and we use no chemicals during processing. “

Community

Keysbrook created new jobs in the Peel region, with the majority of the workforce living within 30 minutes driving distance of the operation.

Mr Matthews said MZI had purposely engaged several local service providers and suppliers, and actively contributed to a range of local community initiatives in the immediate North Dandalup and Serpentine areas.

“We are working closely with those communities on a range of initiatives to support local people and business,” he said.

“The key mechanism for this support is through our establishment of the Keysbrook Community Consultation Group (KCCG), which provides formal two-way communication flow between community members and MZI.

“The KCCG is also the primary vehicle for managing the funds (around $50,000 per annum) we provide for a range of community partnerships in the Shire of Murray and the Shire of Serpentine-Jarrahdale.”

In 2015 these included providing improved facilities for volunteer fire fighting services in Keysbrook and North Dandalup; provision of children’s play equipment and information technology to local primary schools; sponsorship of sporting clubs and events; and support of local council safety initiatives.